India's Krishnapatnam port to invest RM5.5b by 2011
Krishnapatnam Port Co, a family-owned start-up on India's east coast, will invest US$1.6 billion (RM5.5 billion) in a new container and bulk port to profit from the growing trade between Asia's economic giants China and India.
The port, close to the sea trade lanes linking Asia to the Persian Gulf and Europe, is due to open for container ships in June 2008 and will be completed by 2011.
It will have an initial annual capacity of one million twenty-foot containers, Mahesh Goel, the head of Krishnapatnam Port Company's container business, told Reuters in an interview.
Singapore, the world's busiest port, moved nearly 24 million boxes at its terminals last year, while India's biggest port, Mumbai, handles around two million twenty-foot containers a year.
"We are also looking into opening two more ports on India's east coast and one on the west coast," he said but declined to give details because the projects are still at an early stage.
Krishnapatnam Port Co is owned by Hyderabad-based businessman CV Rao and his sons. The family also owns the Navayuga Group, a holding company with interests in marine construction and information technology.
Congested ports and other creaky transport infrastructure have become a growing problem for Asia's third-largest economy and the world's second-fastest growing large economy after China.
India is forecast to have grown at its fastest pace -- 9.2% -- in almost two decades in the year to March, and growth has choked ports and clogged highways due to increased activity.
Krishnapatnam aims to compete with Chennai, a 125-year old port 180km to the south, and hopes to lure container lines such as AP Moeller Maersk, Neptune Orient Lines or Hapag-Lloyd by undercutting its rival in price.
Chennai predicts its traffic will rise to 1.5 million twenty-foot containers by 2010.
"Lines are telling us they want a port with better facilities. Charges at Krishnapatnam will definitely be lower than in Chennai," Goel said on the sidelines of a shipping conference.
The port, which has a 50-year licence, is adjacent to the 4,000ha Andhra Pradesh special economic zone, a duty-free manufacturing enclave, that may also boost business.
Krishnapatnam Port's projects will be 70% debt-financed, with the rest funded by shareholders.
Goel said that research by London-based shipping consultants Drewry has shown that by 2019 the port could handle the equivalent of 5.6 million twenty-foot containers a year. He said the port had received strong interest from container lines.
"There is just not enough capacity on the Indian east coast. Container trade between east coast India and China is growing at 8% a year and the existing ports can't cope."
The company hopes that within 10 years around 60% of its container traffic will be coming from trans-shipments -- cargo moved from small, regional feeder ships on to large vessels that can carry close to 10,000 containers and serve the world's main trade routes between Asia, America and Europe.
"Initially, trans-shipment will make up 5-10% of total container volume but we are aiming to bring that to 60% by 2016/17," he said, adding that Indian ports were lacking the infrastructure to manage large numbers of containers.
Port operators tend to focus on achieving high volumes of container trans-shipments because margins are low.
The port expects to move around 200,000 containers in its first year of operation and some 450,000 in the second year, well below its capacity of 1 million twenty-foot containers.
Goel said that Krishnapatnam was already handling some 125,000 tonnes of iron ore a month and that, once completed in 2011, it could also handle specialised cargoes such as liquefied natural gas, and oil and petroleum products.
The port, close to the sea trade lanes linking Asia to the Persian Gulf and Europe, is due to open for container ships in June 2008 and will be completed by 2011.
It will have an initial annual capacity of one million twenty-foot containers, Mahesh Goel, the head of Krishnapatnam Port Company's container business, told Reuters in an interview.
Singapore, the world's busiest port, moved nearly 24 million boxes at its terminals last year, while India's biggest port, Mumbai, handles around two million twenty-foot containers a year.
"We are also looking into opening two more ports on India's east coast and one on the west coast," he said but declined to give details because the projects are still at an early stage.
Krishnapatnam Port Co is owned by Hyderabad-based businessman CV Rao and his sons. The family also owns the Navayuga Group, a holding company with interests in marine construction and information technology.
Congested ports and other creaky transport infrastructure have become a growing problem for Asia's third-largest economy and the world's second-fastest growing large economy after China.
India is forecast to have grown at its fastest pace -- 9.2% -- in almost two decades in the year to March, and growth has choked ports and clogged highways due to increased activity.
Krishnapatnam aims to compete with Chennai, a 125-year old port 180km to the south, and hopes to lure container lines such as AP Moeller Maersk, Neptune Orient Lines or Hapag-Lloyd by undercutting its rival in price.
Chennai predicts its traffic will rise to 1.5 million twenty-foot containers by 2010.
"Lines are telling us they want a port with better facilities. Charges at Krishnapatnam will definitely be lower than in Chennai," Goel said on the sidelines of a shipping conference.
The port, which has a 50-year licence, is adjacent to the 4,000ha Andhra Pradesh special economic zone, a duty-free manufacturing enclave, that may also boost business.
Krishnapatnam Port's projects will be 70% debt-financed, with the rest funded by shareholders.
Goel said that research by London-based shipping consultants Drewry has shown that by 2019 the port could handle the equivalent of 5.6 million twenty-foot containers a year. He said the port had received strong interest from container lines.
"There is just not enough capacity on the Indian east coast. Container trade between east coast India and China is growing at 8% a year and the existing ports can't cope."
The company hopes that within 10 years around 60% of its container traffic will be coming from trans-shipments -- cargo moved from small, regional feeder ships on to large vessels that can carry close to 10,000 containers and serve the world's main trade routes between Asia, America and Europe.
"Initially, trans-shipment will make up 5-10% of total container volume but we are aiming to bring that to 60% by 2016/17," he said, adding that Indian ports were lacking the infrastructure to manage large numbers of containers.
Port operators tend to focus on achieving high volumes of container trans-shipments because margins are low.
The port expects to move around 200,000 containers in its first year of operation and some 450,000 in the second year, well below its capacity of 1 million twenty-foot containers.
Goel said that Krishnapatnam was already handling some 125,000 tonnes of iron ore a month and that, once completed in 2011, it could also handle specialised cargoes such as liquefied natural gas, and oil and petroleum products.
